Stating that the local distribution company (LDC) story from the buyer’s perspective is one of “growth and more growth,” Nick Stavropoulos, president of KeySpan Energy Delivery New England, said that at the end of the day, LDCs will “remain the key link” to the natural gas customer, ensuring reliable gas service.
Speaking at the fourth annual Northeast Natural Gas Symposium in Boston, Stavropoulos noted that the future path of LDCs is not without its hurdles. “There are some critical challenges that we, the LDC — as buyers — face in the infrastructure equation,” he said. “In spite of that, I’ve chosen to characterize our situation as ‘Room to Grow.’ Some may consider today’s challenges a matter of being caught between the proverbial rock and hard spot.”
Despite the challenges — which include the United States coming off of its worst recession in a generation in 2002 — KeySpan said it grew its New England business by over 23,000 new residential heating customers in 2002. Company-wide, Stavropoulos said KeySpan expanded its gas sales by 22 Bcf, and there is a lot more growing that can be done. “We maintain that growth is the key in 2003,” he said.
“Our company as a whole is at only 52% of market saturation. Here in New England, KeySpan is 50% market saturation,” Stavropoulos said. “Because of low penetration rates in Long Island and New England, we have more than one million remaining prospects in our territory. We must plan for a reliable level of service, while not wasting our customers’ money by spending above a certain level. We also see growth opportunities and new uses of natural gas with gas vehicles fuel cells, distributed generation and other products.”
Stavropoulos said there are the three key issues that must be addressed from a buyer’s perspective:
“KeySpan’s customers utilize over 60% of their gas between November and March,” he noted. “Therefore, access to additional gas storage is important to support growth so that we can avail ourselves of new deliveries on both Tennessee and [Algonquin Gas Transmission].” To help ensure peak day demand in southeastern Massachusetts and Cape Cod, KeySpan recently purchased ALNG’s Providence LNG facility.
KeySpan said it will continue to work with suppliers, the interstate pipelines and regulators to bring more pipeline, storage and LDC system infrastructure to deliver product to the market.
“With the HUBLINE interconnection to the AGT system and the M&NE [Maritimes & Northeast Pipeline] expansion, we will have better access to supplies from both central and Atlantic Canada,” he said. “Islander East, in which KeySpan is a 50% owner, will allow us to share existing and future pipeline capacity between New England and New York.”
Stavropoulos said an intensive not in my back yard attitude (NIMBY) still remains one of the largest challenges for LDCs, because often times it is the mindset of states, not just individuals. He said the NIMBY reaction was much stronger than expected and is affecting both electric and gas transmission, such as the Islander East pipe project and the project to run electric cable under Long Island Sound, which have both met with considerable backlash.
One possible solution argues that the infrastructure crunch could be ameliorated by additional upstream storage and more effective use of existing storage through upgrades and expansions and the growing importance of LNG.
The company added that it has just received approval for its five-year supply plan through 2006. To comply with the current regulatory framework, Stavropoulos said KeySpan has contracted with a wide variety of suppliers and many of the contracts extend for up to only ten years. “This represents a change from our former planning horizon of ten to twenty years,” he said. “A new shortened reality — this is the operating atmosphere in which KeySpan must function.”
Stavropoulos also weighed in on President Bush’s push for a national energy plan, saying that natural gas utilities are welcoming it. “The less we depend on imported oil, and the more we rely on natural gas as an environmentally responsible fuel alternative, the better position we will be here in the United States when it comes to energy supply,” he said.
“We believe the LDC’s, pipelines, gas suppliers, regulators and politicians must work together cooperatively to develop creative solutions to insure that adequate supply and delivery infrastructure is available to bring competitively priced natural gas to our growing markets here in the Northeast.”
KeySpan is the largest gas distribution company in the Northeast United States with some 43-hundred square miles of territory, 21,000 miles of gas mains and 2.5 million gas customers in New York State and New England.
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